(Web Desk) – Gold prices climbed more than two percent on Monday after US and Iranian officials announced that they had reached an initial framework agreement aimed at ending their conflict, easing concerns over inflation and interest rates.
Spot gold rose 2.5 percent to $4,322.87 per ounce by 0312 GMT, reaching its highest level since June 9 and extending gains for a third consecutive session. Meanwhile, US gold futures for August delivery advanced 2.5 percent to $4,344.80 per ounce.
According to officials from both countries, the proposed framework seeks to end hostilities, lift the US blockade on Iran and reopen the Strait of Hormuz. Prime Minister Shehbaz Sharif also stated in a post on X that the agreement is expected to be formally signed in Switzerland on Friday.
The US dollar weakened to a 10-day low, making dollar-denominated gold more affordable for holders of other currencies. At the same time, oil prices fell by more than four percent, helping to ease inflation expectations.
Tim Waterer, chief market analyst at KCM Trade, said lower oil prices and a softer dollar, driven by reduced geopolitical risks and hopes for the reopening of the Strait of Hormuz, had created favourable conditions for gold.
He noted that the precious metal was enjoying its strongest support in recent weeks, although the durability of the rally would depend on the long-term success of the peace agreement.
Gold prices have declined by around 20 percent since the outbreak of the US-Israeli conflict involving Iran in late February. The disruption of oil supplies through the Strait of Hormuz had previously pushed global energy prices higher, fuelling concerns about inflation and the prospect of prolonged elevated interest rates.
As a non-yielding asset, gold generally becomes less attractive when interest rates remain high. Investors are now awaiting the US Federal Reserve’s policy decision on Wednesday, the first under Chair Kevin Warsh, with markets widely expecting rates to remain unchanged.
Asian stock markets also moved higher following reports of the Iran-US understanding, reflecting improved investor sentiment.
In a market note, OCBC said concerns over currency debasement, fiscal risks and broader geopolitical fragmentation continued to support long-term demand for gold, while easing energy-driven inflation could reinforce those trends.
Among other precious metals, spot silver gained 3.6 percent to $70.39 per ounce, platinum rose 3.3 percent to $1,773.70, and palladium advanced 3.3 percent to $1,324.75.
